The audit report recommended improved tracking and reporting of the state's 152 economic development programs, which were examined from Fiscal Years 2001-02 through 2004-05. The state spent $152.8 million on economic development programs in the 2003-05 biennium, but the audit found only limited efforts to account for program results.

The audit report also asked the state Department of Commerce to conduct an internal audit of the CAPCO program, and report to the Joint Legislative Audit Committee on its effectiveness by Feb. 15, 2007.

The program began in 1999 to stimulate venture investments by reducing the tax liability of Wisconsin insurance companies that invest in venture capital firms certified by Commerce. CAPCOs are required by state law to invest at least 50 percent of their investment funds from insurance companies in qualified businesses during the program's first five years.

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High cost per job?

Of the $50 million in tax credits - $16.7 million per CAPCO - made available in the first 10 years of the program, the report said insurance companies had claimed $29 million by 2004, and the CAPCOs had invested $26 million, or 52 percent, in 19 businesses that created a total of 316 jobs. The average cost per job created was more than $90,000.

In an interview with WTN Media, Neis said the Audit Bureau used outdated job figures from December 2004. He noted that businesses receiving CAPCO investments include companies that will continue to add jobs as they grow.

"We manage one-third of that [CAPCO] money, and we have created over 512 jobs in the companies we've invested in," Neis said.

Among those companies is TomoTherapy, a Madison-based medical imaging device manufacturer which now employs more than 400 people and expects to add 100 more employees by year's end, Neis said.

From the Venture Investor perspective alone, its CAPCO companies have grown from 151 to 663 jobs, creating the 512 net new jobs, while it has claimed 11.6 million in tax credits to date. That translates to $22,786 per job, and the companies are still growing, Neis said.

Kent Velde, managing director of Banc One Stonehenge Capital Fund Wisconsin, could not provide a jobs-per-dollar comparison, but he did say Banc One Stonehenge has invested in 13 companies through the CAPCO program. Of those 13 businesses, he categorizes seven as early-stage, high-technology companies, and six as growth companies.

Those 13 companies have created a combined 120 new jobs during the time Banc One Stonehenge has been an investor, but Velde doesn't consider job creation to be the only measure of value. He noted the seven early-stage companies are at a point of development where they are not adding a lot of jobs.

However, three of the 13 companies had compounded revenue growth that exceeded 40 percent per year, and seven had compounded revenue growth that exceeded 10 percent each year, he said.

There is little doubt that these investments "will lead to significant growth in jobs" once the technologies have been proven in the market, he added.

CAPCOs elsewhere

Citing concerns that have been raised against CAPCO programs in other states, the Audit Bureau report mentioned unmet expectations of CAPCOs in Colorado and Louisiana, which also is based on outdated information, Neis said.

In a 2003 review of the Colorado program, the Audit Bureau said that state had invested only $44.4 million of the $100 million in available credits, and a 2001 examination of the program in Louisiana found that only $184 million of the available $600 million had been invested.

It also noted that one criticism of CAPCOs is that since the tax credits are allocated on a dollar-per-dollar basis, state government incurs all the investment risk.

Neis, however, said the audit report fails to take into account that the Colorado program was only 18 months old at the time, and already had exceeded the skeptics' predictions. In addition, he said the bulk of the money in Louisiana had been raised in the two years prior to 2001 - not enough time to deploy that much funding. Since then, the tax credits have been more fully dispersed, he said.

"They really cited some old information and some incomplete information that distorts the effectiveness of the CAPCO programs," Neis said.

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